1
Home Insurance Company vs. Eastern Shipping Lines
No. L-34382. July 20, 1983.*
THE HOME INSURANCE COMPANY, petitioner vs. EASTERN SHIPPING LINES and/or ANGEL JOSE
TRANSPORTATION, INC. and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of
First Instance, Branch XVII, respondents.
No. L-34383. July 20, 1983.*
THE HOME INSURANCE COMPANY, petitioner vs. N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES,
INC, and/or GUACODS, INC., and HON. A. MELENCIO HERRERA, Presiding Judge of the Manila Court
of First Instance, Branch XVII, respondents.
Corporation Law; Statutes; The Corporation Law should be given an interpretation that would foster
friendly commercial intercourse among countries.—To repeat, the objective of the law was to
subject the foreign corporation to the jurisdiction of our courts.
The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not
hamper the development of trade relations and which fosters friendly commercial intercourse
among countries.
Same; There is a penalty for transacting business in the Philippines by a foreign corporation without
license.—Insofar as transacting business without a license is concerned, Section 69 of the
Corporation Law imposed a penal sanction—imprisonment for not less than six months nor more
than two years or payment of a fine not less than P200.00 nor more than P1,000.00 or both in the
discretion of the court. There is a penalty for transacting business without registration.
Same; Contracts; Insurance Law; A foreign insurance corporation not license to do business in the
Philippines.—And insofar as litigation is concerned, the foreign corporation or its assignee may not
maintain any suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is
silent on whether or not the contract executed by a foreign corporation with no capacity to sue is
null and void ab initio.
Same; Contracts; Insurance Law; A contract entered into by a foreign insurance corporation not
license to do business in the Philippines is not void.—“In another case, the court said: ‘The very fact
that the prohibition against maintaining an action in the courts of the state was inserted in the
statute ought to be conclusive proof that the legislature did not intend or understand that contracts
made without compliance with the law were void. The statute does not fix any time within which
foreign corporations shall comply with the Act. If such contracts were void, no suits could be
prosecuted on them in any court. x x x The primary purpose of our statute is to compel a foreign
corporation desiring to do business within the state to submit itself to the jurisdiction of the courts
of this state. The statute was not intended to exclude foreign corporations from the state. It does
not, in terms, render invalid contracts made in this state by non-complying corporations. The better
reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that
where, as here, there is a prohibition with a penalty, with no express or implied declarations
respecting the validity of enforceability of contracts made by qualified foreign corporations, the
contracts x x x are enforceable x x x upon compliance with the law.’ ” (Peter & Burghard Stone Co. v.
Carper, 172 N.E. 319
[1930]). Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from
Marshall Wells Co. v. Henry W. Elser & Co. (supra), it has long been the rule that a foreign
corporation actually doing business in the Philippines without license to do so may be sued in our
courts.
Same; Same; Same; The present Corporation Code attaches a penal sanction and denies access to
courts and administrative tribunals to foreign corporations doing business here without license.—It
is, therefore, not necessary to declare the contract null and void even as against the erring foreign
corporation. The penal sanction for the violation and the denial of access to our courts and
administrative bodies are sufficient from the viewpoint of legislative policy.
Same; Same; Same; Lack of capacity to sue by foreign corporation at time of execution of contract
cured by its subsequent registration here.—Our ruling that the lack of capacity at the time of the
execution of the contracts was cured by the subsequent registration is also strengthened by the
procedural aspects of these cases.
Same; Same; Same; Actions; Practice and Pleadings; Where plaintiff corporation alleges it has
capacity to sue, it is not sufficient for the purpose of attacking such capacity to deny the same for
lack of knowledge; defendant must supply particulars within his knowledge of such lack of capacity
to sue.—We find the general denials inadequate to attack the foreign corporations lack of capacity to
sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that
“a party desiring to raise an issue as to the legal existence of any party or the capacity of any party to
sue or be sued in a representative capacity shall do so by specific denial, which shall include such
supporting particulars as are particularly within the pleader’s knowledge. At the very least, the
private respondents should have stated particulars in their answers upon which a specific denial of
the petitioner’s capacity to sue could have been based or which could have supported its denial for
lack of knowledge. And yet, even if the plaintiff’s lack of capacity to sue was not properly raised as an
issue by the answers, the petitioner introduced documentary evidence that it had the authority to
engage in the insurance business at the time it filed the complaints. Home Insurance Company vs.
Eastern Shipping Lines, 123 SCRA 424, No. L-34382, No. L-34383 July 20, 1983
GUTIERREZ, JR., J.:
Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of
First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil
Case No. 71694, on the ground that plaintiff therein, now appellant, had failed to prove its capacity
to sue.
There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the
facts are found in the decision of the respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development
Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot
Rolled Copper Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping
Lines (CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to
Phelps Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment
was insured with plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy
No. AS-73633.
xxx xxx xxx
The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What
the CONSIGNEE ultimately received at its warehouse was the same number of 2,361 coils with
73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to be considered
as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight
263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net loss/shortage of
593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according to the claims presented by the
consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the
TRANSPORTATION COMPANY (Exhibit "K- l").
For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance
policy the amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights
and actions of the CONSIGNEE. Plaintiff made demands for payment against the CARRIER and
the TRANSPORTATION COMPANY for reimbursement of the aforesaid amount but each refused
to pay the same. ...
The facts of L-34383 are found in the decision of the lower court as follows:
On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30
packages of Service Parts of Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN"
owned by the defendant, N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent,
the defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading No.
22 for transportation to, and delivery at, Manila, in favor of the consignee, international Harvester
Macleod, Inc. (CONSIGNEE). The shipment was insured with plaintiff company under its Cargo Policy
No. AS-73735 "with average terms" for P98,567.79.
xxx xxx xxx
The packages discharged from the VESSEL numbered 29, of which seven packages were found
to be in bad order. What the CONSIGNEE ultimately received at its warehouse was the same
number of 29 packages with 9 packages in bad order. Out of these 9 packages, 1 package was
accepted by the CONSIGNEE in good order due to the negligible damages sustained. Upon
inspection at the consignee's warehouse, the contents of 3 out of the 8 cases were also found
to be complete and intact, leaving 5 cases in bad order. The contents of these 5 packages
showed several items missing in the total amount of $131.14; while the contents of the
undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98.
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For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid
the CONSIGNEE under its Insurance Cargo Policy the amount of P2,426.98, by virtue of
which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Demands
were made on defendants CARRIER and CONSIGNEE for reimbursement thereof but they
failed and refused to pay the same.
In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:
The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through
its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building, Ayala
Avenue, Makati, Rizal.
In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:
Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge
or information sufficient to form a belief as to the truth thereof.
Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the
allegations of the complaint, regarding the capacity of plaintiff-appellant. The pertinent paragraph of
this answer reads as follows:
Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.
In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and
Guacods, Inc., filed their answers. They denied the petitioner-appellant's capacity to sue for lack of
knowledge or information sufficient to form a belief as to the truth thereof.
As earlier stated, the respondent court dismissed the complaints in the two cases on the same
ground, that the plaintiff failed to prove its capacity to sue. The court reasoned as follows:
In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a)
defendant Eastern Shipping Lines should pay plaintiff the sum of P1,630.22 with interest at the
legal rate from January 5, 1968, the date of the institution of the Complaint, until fully paid; b)
defendant Angel Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with
interest at the legal rate from January 5, 1968 until fully paid; c) the counterclaim of defendant
Angel Jose transportation, Inc. should be ordered dismissed; and d) each defendant to pay one-
half of the costs.
The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to
protect the public interest. Hence, although defendants have not raised the question of
plaintiff's compliance with that provision of law, the Court has resolved to take the matter into
account.
A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the
transaction upon which it bases its complaint is an isolated one, or that it is licensed to transact
business in this country, failing which, it will be deemed that it has no valid cause of action
(Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of
cases filed by plaintiff before this Court, of which judicial cognizance can be taken, and under
the ruling in Far East International Import and Export Corporation vs. Hankai Koayo Co., 6 SCRA

725, it has to be held that plaintiff is doing business in the Philippines. Consequently, it must
have a license under Section 68 of the Corporation Law before it can be allowed to sue.
The situation of plaintiff under said Section 68 has been described as follows in Civil Case No.
71923 of this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd Lijnen, of which judicial
cognizance can also be taken:
Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967, issued by
the Office of the Insurance Commissioner authorizing plaintiff to transact insurance
business in this country. By virtue of Section 176 of the Insurance Law, it has to be
presumed that a license to transact business under Section 68 of the Corporation Law had
previously been issued to plaintiff. No copy thereof, however, was submitted for a reason
unknown. The date of that license must not have been much anterior to July 1, 1967. The
preponderance of the evidence would therefore call for the finding that the insurance
contract involved in this case, which was executed at Makati, Rizal, on February 8, 1967, was
contracted before plaintiff was licensed to transact business in the Philippines.
This Court views Section 68 of the Corporation Law as reflective of a basic public policy.
Hence, it is of the opinion that, in the eyes of Philippine law, the insurance contract involved
in this case must be held void under the provisions of Article 1409 (1) of the Civil Code, and
could not be validated by subsequent procurement of the license. That view of the Court
finds support in the following citation:
According to many authorities, a constitutional or statutory prohibition against a foreign
corporation doing business in the state, unless such corporation has complied with
conditions prescribed, is effective to make the contracts of such corporation void, or at least
unenforceable, and prevents the maintenance by the corporation of any action on such
contracts. Although the usual construction is to the contrary, and to the effect that only the
remedy for enforcement is affected thereby, a statute prohibiting a non-complying
corporation from suing in the state courts on any contract has been held by some courts to
render the contract void and unenforceable by the corporation, even after its has complied
with the statute." (36 Am. Jur. 2d 299-300).
xxx xxx xxx
The said Civil Case No. 71923 was dismissed by this Court. As the insurance
contract involved herein was executed on January 20, 1967, the instant case should
also be dismissed.
We resolved to consolidate the two cases when we gave due course to the petition.
The petitioner raised the following assignments of errors:
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THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR
CAPACITY OF PLAINTIFF-APPELLANT.
THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT
PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.
On the basis of factual and equitable considerations, there is no question that the private
respondents should pay the obligations found by the trial court as owing to the petitioner. Only the
question of validity of the contracts in relation to lack of capacity to sue stands in the way of the
petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in
single acts or solitary transactions and not engaged in business is likewise not in issue. The petitioner
was engaged in business without a license. The private respondents' obligation to pay under the
terms of the contracts has been proved.
When the complaints in these two cases were filed, the petitioner had already secured the necessary
license to conduct its insurance business in the Philippines. It could already filed suits.
Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign
insurance company duly authorized to do business in the Philippines through its agent Mr. Victor H.
Bello. However, when the insurance contracts which formed the basis of these cases were executed,
the petitioner had not yet secured the necessary licenses and authority. The lower court, therefore,
declared that pursuant to the basic public policy reflected in the Corporation Law, the insurance
contracts executed before a license was secured must be held null and void. The court ruled that the
contracts could not be validated by the subsequent procurement of the license.
The applicable provisions of the old Corporation Law, Act 1459, as amended are:
Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other
than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands
until after it shall have obtained a license for that purpose from the chief of the Mercantile Register
of the Bureau of Commerce and Industry, (Now Securities and Exchange Commission. See RA 5455)
upon order of the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan
banks, trust corporations, and banking institutions of all kinds, and upon order of the Secretary of
Commerce and Communications (Now Secretary of Trade. See 5455, section 4 for other
requirements) in case of all other foreign corporations. ...
xxx xxx xxx
Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other
than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands
or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever,
unless it shall have the license prescribed in the section immediately preceding. Any officer, director,
or agent of the corporation or any person transacting business for any foreign corporation not having
the license prescribed shag be punished by imprisonment for not less than six months nor more than

two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by
both such imprisonment and fine, in the discretion of the court.
As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser & Co. (46
Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject the foreign
corporation doing business in the Philippines to the jurisdiction of our courts. The Marshall Wells Co.
decision referred to a litigation over an isolated act for the unpaid balance on a bill of goods but the
philosophy behind the law applies to the factual circumstances of these cases. The Court stated:
xxx xxx xxx
Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court
to give it a literal meaning Counsel would have the law read thus: "No foreign corporation shall be
permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the
contrary, desires for the court to consider the particular point under discussion with reference to all
the law, and thereafter to give the law a common sense interpretation.
The object of the statute was to subject the foreign corporation doing business in the Philippines to
the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation
from performing single acts, but to prevent it from acquiring a domicile for the purpose of business
without taking the steps necessary to render it amenable to suit in the local courts. The implication
of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines, from securing redress in the
Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such
foreign corporations. The effect of the statute preventing foreign corporations from doing business
and from bringing actions in the local courts, except on compliance with elaborate requirements,
must not be unduly extended or improperly applied. It should not be construed to extend beyond
the plain meaning of its terms, considered in connection with its object, and in connection with the
spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan, 1; American De Forest Wireless
Telegraph Co. vs. Superior Court of City & Country of San Francisco and Hebbard [1908], 153 Cal.,
533; 5 Thompson on Corporations, 2d ed., chap. 184.)
Confronted with the option of giving to the Corporation Law a harsh interpretation, which would
disastrously embarrass trade, or of giving to the law a reasonable interpretation, which would
markedly help in the development of trade; confronted with the option of barring from the courts
foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with
the option of construing the law to mean that any corporation in the United States, which might
want to sell to a person in the Philippines must send some representative to the Islands before the
sale, and go through the complicated formulae provided by the Corporation Law with regard to the
obtaining of the license, before the sale was made, in order to avoid being swindled by Philippine
citizens, or of construing the law to mean that no foreign corporation doing business in the
Philippines can maintain any suit until it shall possess the necessary license;-confronted with these
options, can anyone doubt what our decision will be? The law simply means that no foreign
corporation shall be permitted "to transact business in the Philippine Islands," as this phrase is
4
known in corporation law, unless it shall have the license required by law, and, until it complies with
the law, shall not be permitted to maintain any suit in the local courts. A contrary holding would
bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided.
(Sioux Remedy Co. vs. Cope and Cope, supra; Perkins, Philippine Business Law, p. 264.)
To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our
courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which
does not hamper the development of trade relations and which fosters friendly commercial
intercourse among countries.
The objectives enunciated in the 1924 decision are even more relevant today when we view
commercial relations in terms of a world economy, when the tendency is to re-examine the political
boundaries separating one nation from another insofar as they define business requirements or
restrict marketing conditions.
We distinguish between the denial of a right to take remedial action and the penal sanction for non-
registration.
nsofar as transacting business without a license is concerned, Section 69 of the Corporation Law
imposed a penal sanction-imprisonment for not less than six months nor more than two years or
payment of a fine not less than P200.00 nor more than P1,000.00 or both in the discretion of the
court. There is a penalty for transacting business without registration.
And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any
suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is silent on
whether or not the contract executed by a foreign corporation with no capacity to sue is null and
void ab initio.
We are not unaware of the conflicting schools of thought both here and abroad which are divided on
whether such contracts are void or merely voidable. Professor Sulpicio Guevarra in his
book Corporation Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234) cites an Illinois
decision which holds the contracts void and a Michigan statute and decision declaring them merely
voidable:
xxx xxx xxx
Where a contract which is entered into by a foreign corporation without complying with the local
requirements of doing business is rendered void either by the express terms of a statute or by
statutory construction, a subsequent compliance with the statute by the corporation will not enable
it to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See
also Diamond Glue Co. v. U.S. Glue Co., supra see note 18.) But where the statute merely prohibits
the maintenance of a suit on such contract (without expressly declaring the contract "void"), it was
held that a failure to comply with the statute rendered the contract voidable and not void, and
compliance at any time before suit was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co., supra.)
Notwithstanding the above decision, the Illinois statute provides, among other things that a foreign
corporation that fails to comply with the conditions of doing business in that state cannot maintain a
suit or action, etc. The court said: 'The contract upon which this suit was brought, having been
entered into in this state when appellant was not permitted to transact business in this state, is in

violation of the plain provisions of the statute, and is therefore null and void, and no action can be
maintained thereon at any time, even if the corporation shall, at some time after the making of the
contract, qualify itself to transact business in this state by a compliance with our laws in reference to
foreign corporations that desire to engage in business here. (United Lead Co. v. J.M. Ready Elevator
Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)
A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall
maintain any action in this state upon any contract made by it in this state after the taking effect of
this Act, untilit shall have fully complied with the requirement of this Act, and procured a certificate
to that effect from the Secretary of State," It was held that the above statute does not render
contracts of a foreign corporation that fails to comply with the statute void, but they may be
enforced only after compliance therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E.
706 [1906]; Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges &
Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).
It has also been held that where the law provided that a corporation which has not complied with
the statutory requirements "shall not maintain an action until such compliance". "At the
commencement of this action the plaintiff had not filed the certified copy with the country clerk of
Madera County, but it did file with the officer several months before the defendant filed his
amended answer, setting up this defense, as that at the time this defense was pleaded by the
defendant the plaintiff had complied with the statute. The defense pleaded by the defendant was
therefore unavailable to him to prevent the plaintiff from thereafter maintaining the action. Section
299 does not declare that the plaintiff shall not commence an action in any county unless it has filed
a certified copy in the office of the county clerk, but merely declares that it shall not maintain an
action until it has filled it. To maintain an action is not the same as to commence an action, but
implies that the action has already been commenced." (See also Kendrick & Roberts Inc. v. Warren
Bros. Co., 110 Md. 47, 72 A. 461 [1909]).
In another case, the court said: "The very fact that the prohibition against maintaining an action in
the courts of the state was inserted in the statute ought to be conclusive proof that the legislature
did not intend or understand that contracts made without compliance with the law were void. The
statute does not fix any time within which foreign corporations shall comply with the Act. If such
contracts were void, no suits could be prosecuted on them in any court. ... The primary purpose of
our statute is to compel a foreign corporation desiring to do business within the state to submit itself
to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign
corporations from the state. It does not, in terms, render invalid contracts made in this state by non-
complying corporations. The better reason, the wiser and fairer policy, and the greater weight lie
with those decisions which hold that where, as here, there is a prohibition with a penalty, with no
express or implied declarations respecting the validity of enforceability of contracts made by
qualified foreign corporations, the contracts ... are enforceable ... upon compliance with the law."
(Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)
Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall
Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that a foreign corporation actually
5
doing business in the Philippines without license to do so may be sued in our courts. The defendant
American corporation in General Corporation of the Philippines v. Union Insurance Society of Canton
Ltd et al. (87 Phil. 313) entered into insurance contracts without the necessary license or authority.
When summons was served on the agent, the defendant had not yet been registered and authorized
to do business. The registration and authority came a little less than two months later. This Court
ruled:
Counsel for appellant contends that at the time of the service of summons, the appellant had not yet
been authorized to do business. But, as already stated, section 14, Rule 7 of the Rules of Court makes
no distinction as to corporations with or without authority to do business in the Philippines. The test
is whether a foreign corporation was actually doing business here. Otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to obtain the corresponding license and
authority to do business may successfully though unfairly plead such neglect or illegal act so as to
avoid service and thereby impugn the jurisdiction of the local courts. It would indeed be anomalous
and quite prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in
the regular course of business accept and pay for shipments of goods from America, relying for their
protection on duly executed foreign marine insurance policies made payable in Manila and duly
endorsed and delivered to them, that when they go to court to enforce said policies, the insurer who
all along has been engaging in this business of issuing similar marine policies, serenely pleads
immunity to local jurisdiction because of its refusal or neglect to obtain the corresponding license to
do business here thereby compelling the consignees or purchasers of the goods insured to go to
America and sue in its courts for redress.
There is no question that the contracts are enforceable. The requirement of registration affects only
the remedy.
Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the
ambiguity caused by the wording of Section 69 of the old Corporation Law.
Section 133 of the present Corporation Code provides:
SEC. 133. Doing business without a license.-No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shag be permitted to maintain or intervene
in any action, suit or proceeding in any court or administrative agency in the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or administrative tribunals
on any valid cause of action recognized under Philippine laws.
The old Section 69 has been reworded in terms of non-access to courts and administrative agencies
in order to maintain or intervene in any action or proceeding.
The prohibition against doing business without first securing a license is now given penal sanction
which is also applicable to other violations of the Corporation Code under the general provisions of
Section 144 of the Code.
It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign
corporation. The penal sanction for the violation and the denial of access to our courts and
administrative bodies are sufficient from the viewpoint of legislative policy.
 6

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the
subsequent registration is also strengthened by the procedural aspects of these cases.
The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to
do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the
Oledan Building at Ayala Avenue, Makati. These are all the averments required by Section 4, Rule 8
of the Rules of Court. The petitioner sufficiently alleged its capacity to sue. The private respondents
countered either with an admission of the plaintiff's jurisdictional averments or with a general denial
based on lack of knowledge or information sufficient to form a belief as to the truth of the
averments.
We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in
the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that "a party
desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or
be sued in a representative capacity shall do so by specific denial, which shag include such
supporting particulars as are particularly within the pleader's knowledge. At the very least, the
private respondents should have stated particulars in their answers upon which a specific denial of
the petitioner's capacity to sue could have been based or which could have supported its denial for
lack of knowledge. And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an
issue by the answers, the petitioner introduced documentary evidence that it had the authority to
engage in the insurance business at the time it filed the complaints.
WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed
and set aside.
In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22
with interest at the legal rate from January 5, 1968 until fully paid and respondent Angel Jose
Transportation Inc. is ordered to pay the petitioner the sum of P1,630.22 also with interest at the
legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the costs. The
counterclaim of Angel Jose Transportation Inc. is dismissed.
In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the
petitioner the sum of P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid,
the sum of P500.00 attorney's fees, and costs, The complaint against Guacods, Inc. is dismissed.
SO ORDERED.